Within weeks, two low-profile legal disputes may determine whether an unprecedented wave of bankruptcies expected to hit U.S. oil and gas producers this year will imperil the $500 billion pipeline sector as well, Reuters reported today. In the two court fights, U.S. energy producers are trying to use chapter 11 protection to shed long-term contracts with the pipeline operators that gather and process shale gas before it is delivered to consumer markets. The attempts to shed the contracts by Sabine Oil & Gas and Quicksilver Resources are viewed by executives and lawyers as a litmus test for deals worth billions of dollars annually for the so-called midstream sector. Pipeline operators have argued that the contracts are secure, but restructuring experts say that if the two producers manage to tear up or renegotiate their deals, others will follow. That could add a new element of risk for already hard-hit investors in midstream companies, which have plowed up to $30 billion a year into infrastructure to serve the U.S. fracking boom. Read more.
For further analysis of oil, gas or other natural resources company bankruptcies, pick up a copy of ABI’s When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy.
